Genetically engineered cyanobacterial strains that have improved growth rate, biomass productivity, and metabolite productivity could be a better option for sustainable bio-metabolite production. The global demand for biobased metabolites with nutraceuticals and health benefits has increased due to their safety and plausible therapeutic and nutritional utility. Cyanobacteria are solar-powered green cellular factories that can be genetically tuned to produce metabolites with nutraceutical and pharmaceutical benefits. The present review discusses biotechnological endeavors for producing bioprospective compounds from genetically engineered cyanobacteria and discusses the challenges and troubleshooting faced during metabolite production. This review explores the cyanobacterial versatility, the use of engineered strains, and the techno-economic challenges associated with scaling up metabolite production from cyanobacteria. Challenges to produce cyanobacterial bioactive compounds with remarkable nutraceutical values have been discussed. Additionally, this review also summarises the challenges and future prospects of metabolite production from genetically engineered cyanobacteria as a sustainable approach.